Gift of Reserved Life Estate

A gift of land, while reserving the right to use the property for life, is another way a donor can contribute to the Frederik Meijer Gardens & Sculpture Foundation. The property would eventually be sold. The donor may deduct the value of the remainder interest as an immediate charitable contribution if the property is a personal residence. The value of the property would be removed from the donor’s estate and, in addition, capital gains taxes would be avoided.

Example

A couple donates the remainder interest of their farm to the Foundation, reserving the right to operate the farm during their lifetime. The property is valued at $350,000 and has a basis of $45,000. Using IRS actuarial tables, the remainder interest has a value of $167,300 (47.8%), which results in a federal income tax deduction. The value of the farm will also be excluded from their estate.

Charitable gift value $167,300
Federal income tax savings ($167,300 x 25%*) - $41,825
Federal capital gains tax avoidance (($350,000 - 45,000) x 47.8%) x 20% - $29,158
MI income tax avoidance (($350,000 - 45,000) x 47.8%) x 4.35% - $6,342
Estimated net cost to the donor, excluding retained interest $89,975
Possible estate tax savings ($350,000 x 40%) $140,000

Benefit to the Foundation

Upon the death of the donor, the Foundation would own the property. The $350,000 proceeds from the sale of the property would be used to set up an endowment fund in the donor's name. The Foundation adds the gift to it's unrestricted endowment fund, which provides support for the Frederik Meijer Gardens & Sculpture Park.

* Individual federal income tax rates vary.
Note: Any estate tax savings will depend on the Estate tax rules in effect on the date of death.
Note: The capital gains tax and Michigan income tax avoidance assumes the donors would otherwise sell their home during their lifetime. If they own it at the survivor's death, it would receive a step up in basis to its fair market value so there would be no capital gain tax or Michigan income tax.

  • Join a Society

    The Bonsai Society is made up of individuals who have made gifts of $100,000 or and the Perennial Society is for those who have given $10,000 to $99,999.

    Learn more »

  • Federal Tax ID (EIN)

    Tax ID: 38 3118579

  • The alternatives described are meant to provide general guidance. They may be subject to technical rules that could affect their use by a donor. You need to consult with your own advisor or a FMG&SF representative to determine which technique is best for you.